Economics · 2008 · May · Paper 2 · SL · Question paper

M08/3/ECONO/SP2/ENG/TZ0/XX+ ECONOMICS STANDARD l Ev El PAPER 2 Wednesday 14 May 2008 (morning) INSTRUCTIONS TO Ca Nd Ida TES  d o not open this examination paper until instructed to do so.  a nswer three questions.  Use fully labelled diagrams and references to the text / data where appropriate. 2 hours 2208-5105 11 pages © International Baccalaureate Organization 2008 22085105 M08/3/ECONO/SP2/ENG/TZ0/XX+ 2208-5105 – 2 – 1. Study the extract below and answer the questions that follow. Free Public Transport for Melbourne  One can make a case for free public transport on social grounds, similar to such merit goods as free health care and free public education.  Public transport carries only 6 % of all travel in Melbourne. Free train, tram and bus rides would boost the number of trips by up to 30 % and reduce negative externalities such as traffic congestion, pollution, greenhouse gases and road accidents.  It would also transform railway stations into activity and business centres and generally make Melbourne a happier place to live, experts say.  When everything is taken into account, it would cost the State Government about $340 million a year to provide free transport. Logically, this has to be weighed up against the alternative, which is to spend an additional $340 million a year on improved services.  Critics of free public transport argue that what primarily deters people from using public transport is not its price but factors like flexibility, convenience and door-to-door travel times. If you live or work in one of the many Melbourne suburbs with no public transport at all, the fact that it’s free isn’t going to make it any more attractive. Economists acknowledge the existence of these non-financial barriers when they say that public transport has a “low price elasticity of demand” and “low cross elasticity of demand”.  International experience, such as Hasselt in Belgium, points to a more effective strategy for shifting travel habits from cars to public transport than just cutting fares. It involves such measures as high service frequencies, central coordination of timetables, traffic priority for trams and buses, and a